South Korean banks earned nearly 14 trillion won in net profit in the first half of this year, according to preliminary figures. Interest income topped 32 trillion won as rising market rates improved net interest margins (NIM). Overall net profit, however, fell more than 6% from a year earlier as securities valuation losses widened.
Domestic banks posted first-half net profit of 13.8 trillion won ($9.9 billion), down 900 billion won, or 6.4%, from 14.7 trillion won in the same period last year, according to preliminary first-half operating results for 2026 released by the Financial Supervisory Service (FSS) on the 23rd.
Net profit at commercial and regional banks fell 3.3% to 9.1 trillion won. Nationwide commercial banks earned 8.1 trillion won, down 3.8%, while regional banks earned 600 billion won, down 8.5%. Specialized banks earned 4.6 trillion won, a 12.0% decline, while internet-only banks earned 400 billion won, up 15.1%.
Interest income, the banks' core revenue source, expanded. First-half interest income rose to 32.2 trillion won, up 2.5 trillion won, or 8.3%, from a year earlier. The gain reflected a 6.4% increase in interest-earning assets such as loan receivables, along with a rise in NIM to 1.56% from 1.52%, up 0.04 percentage point, on higher market rates.
Non-interest income, by contrast, plunged to 2.9 trillion won, down 2.3 trillion won, or 43.4%, from a year earlier, as rising market rates enlarged losses on securities. Securities-related results swung to a 2.5 trillion won loss this year from a 3.2 trillion won profit in the first half of last year. Securities valuation results in particular turned to a 3.2 trillion won loss from a 1.3 trillion won gain.
Cost burdens also grew. Selling and administrative expenses came to a preliminary 14.4 trillion won, up 700 billion won, or 5.4%, from 13.7 trillion won in the first half of last year. Labor costs of 8.5 trillion won and other operating expenses of 5.9 trillion won rose 200 billion won and 500 billion won, respectively, from a year earlier. Loan-loss expenses increased 8.6% to 3.5 trillion won.
Soundness pressures on the banking sector also continued. The delinquency rate at domestic banks rose to 0.56% at the end of June this year, following 0.25% at the end of 2022, 0.38% at the end of 2023, 0.44% at the end of 2024 and 0.50% at the end of last year.
The FSS said it would "strengthen monitoring focused on vulnerable segments where signs of deteriorating soundness, such as a rising delinquency rate, are emerging, in light of growing internal and external uncertainty." It added that it plans "to continue encouraging banks to build up their loss-absorbing capacity, including through provisioning, so that they can maintain soundness even against unexpected shocks and sustain stable funding supply."
